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understandig the working process in finance dacision making

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INVESTMENT BANKING
(1) Investment Banker
An investment banker does both fund-based and fee-based services. In most
cases, he buys new securities from issuers (companies) and sells them to the retail
investors. He also acts as the market maker for securities. The investment banks in
the US also do stock trading, underwriting, broking, asset management and
corporate advisory.
In India, only a very few merchant bankers do such investment function by
putting their own capital. It is more of a fee-based activity here.
(2) Merchant Banker
According to SEBI: ‘a merchant banker is one who is engaged in the
business of issue management either by making arrangements regarding selling,
buying or subscribing to the securities as manager, consultant, advisor or
rendering corporate advisory services in relation to such issue management’.
A merchant banker is a resource mobiliser as well as an advisor to the
companies.
He assists the companies to raise capital to raise the capital by
placing securities with investors.
He does all the drafting and printing of offer documents.
He appoints other market intermediaries to ensure the successful
marketing of the issues.
(3) Categories of Merchant Bankers
Before some of the changes made by SEBI in September 1997, there were four
categories of merchant banker:
Category I Capital adequacy of Rs. 5 crores.
Category II Capital adequacy of Rs. 50 lakhs.
Category III Capital adequacy of Rs. 20 Lakhs.
Category IV No capital adequacy requirement.
At present, only one category (Category I) could function as the merchant banker.
The authorised activities of a merchant banker include issue management,
corporate advisory relating to the issue, underwriting, portfolio management
services, managers, consultants or advisors to the issue. All those who take up
merchant banking activities will have to fulfil the capital adequacy of Rs. 5 crores of
net worth.
(4) Book Building Method

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In book building method, unlike the fixed price offer the price is not
determined in advance. So is the case with the number of shares to be issued.
However, in the case of public issues by Indian companies, the number shares
offered is known before the issue is made. The indicative floor price or the price
band is announced by the issuer and the applicants for shares are asked to
mention their preferred price and the number of price they want to apply.
(5) Book Running Lead Manager (BRLM)
In the pre-issue stage the BRLM has to deal with stock exchange, SEBI and
the Registrar of Companies (RoC) for filing the red herring prospectus.
Further, the registrars to the issue, underwriters and the bankers to the
issue are appointed by BRLM.
During the issue, BRLM monitors the response and the status of the number
of bids received is ascertained.
In the post-issue stage, the number of shares applied for and the price bids
are analysed by the BRLM. He assesses the demand and in consultation
with the issuer fixes the final issue price. This price is also called as the cut
off price.
(6) Red Herring Prospectus
A red herring prospectus does not specify the issue price and the quantity of
shares offered to public. Only the issue capital is mentioned. The prospectus is
prepared by the merchant banker by getting all the information from the company
management. Discussion with the management and personal visits to the plant are
done to gather the information
(7) Due Diligence Certificate
A merchant banker is responsible for verification of the contents of the
prospectus or the letter of offer and reasonableness of the views has to be given by
expressed therein. A due diligence certificate has to be given by the lead manager in
Form C. The certificate is to the effect that the lead manager has examined various
documents for adequate disclosures to investors and the draft prospectus or the
letter of offer is in conformity with the documents examined by him. Further, it
states that the legal requirements have been compiled with and the level of
disclosures is such that it is adequate for the investor to take an informed
investment decision.
(8) Compliance Officer
A compliance officer is appointed by the lead manager. He is responsible for
monitoring the issue process. The compliance officer shall monitor the compliance
of the Act, rules, guidelines, regulations and notifications of SEBI or the
government. The officer is also responsible for the redressal of investor grievances.
(9) Syndicate Members

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INVESTMENT BANKING (1) Investment Banker An investment banker does both fund-based and fee-based services. In most cases, he buys new securities from issuers (companies) and sells them to the retail investors. He also acts as the market maker for securities. The investment banks in the US also do stock trading, underwriting, broking, asset management and corporate advisory. In India, only a very few merchant bankers do such investment function by putting their own capital. It is more of a fee-based activity here. (2) Merchant Banker According to SEBI: ‘a merchant banker is one who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to the securities as manager, consultant, advisor or rendering corporate advisory services in relation to such issue management’. A merchant banker is a resource mobiliser as well as an advisor to the companies. He assists the companies to raise capital to raise the capital by placing securities with investors. He does all the drafting and printing of offer documents. He appoints other market intermediaries to ensure the successful marketing of the issues. (3) Categories of Merchant Bankers Before some of the changes made by SEBI in September 1997, there were four categories of merchant banker: Category I – Capital adequacy of Rs. 5 crores. Category II – Capital adequacy of Rs. 50 lakhs. Category III – Capital adequacy of Rs. 20 Lakhs. Category IV – No capital ad ...
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